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Dropshipping is quite famous business model for online retailers. But you should know the drawbacks of this model before you choose this business model to be the best option.
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DROPSHIPPING CONS THAT EVERY RETAILER SHOULD BE AWARE OF Dropshipping is at the notch these days, thanks to the proliferation of the internet and the accessibility of online stores. Many retailers/ online sellers tout dropshipping for its ease and the benefits it carries- In a small drop of Investment, retailers can gain a huge amount of profit. Even, the pains to load inventory and dispatching merchandise at the customer’s doorstep is upon dropshippers. ButWhy not, this business model considered to be the best option? Here in nexts slides there are some drawbacks of Dropshipping...
Fraudulent Dropshippers • The cases of drop shipping fraud are increasing day by day because of the vast competition. • Retailers have to be on their toes to study the profile of a dropshipper before taking a big step i.e. About Company, Reviews, Market Goodwill, etc… • On the contrary, manufacturers or wholesalers whom retailers approach might not respond to their requests as they consider retailers not serious and don’t wish to handle their inventory. • This reason can change the positive approach to negative and manufacturers may drop the request stating it not to be worth time investing.
Processing merchandise is not easy • Many retailers who work with multiple dropshipping companies might follow a different set of rules for order processing, billing and shipping if the companies carry different rules for their processes. This makes the retailer’s task cumbersome. • The gap between taking an order and processing it to ship can stretch the shipping hours, as a series of conversation and action takes place before the product is sent off to the destination.
Niche Product line • Few retailers are cemented to a single product selling, so if a customer does not find better product line at one store, they easily switch to the stores which serve customers with vast options of brands and products. This results in losing those unreached customers who love to shop for various brands and products. • Retailers suffer this situation if they are associated with a dropshipper who procures inventory of a single product line. • For instance: A potential user browses for designer watches on your website and refines the search to see options of a specific brand. If the visitor doesn’t see multiple designers and styles, this would compel them to leave the site and search for a competitor’s site. This clearly can be a huge loss to single brand stores.
Half-filled glass of information and quality assurance • This is the second most important drawback for which a retailer has to worry about. • Retailers have basic information to provide and are even not sure about the product quality. • They carry only a catalogue with a descriptive information including prices to display in their online stores, everything else is managed and processed by the dropshipper.
Order Tracking • After passing the customer’s order to the dropshipper, the retailer has to constantly coordinate with the dropshipper to track the status of the order and time it will take to ship the consignment at the customer’s doorstep. • The constant updates via mails,messages or calls consumes precious working hours and disturbs the process of both the parties.
Thin Margin line • This is the reason for not choosing dropshipping as the sales strategy. • The difference between the marked price and charged price is the profit which a retailer actually earns. • The profit is moderate and a retailer hardly earns $2-$5 per product. Even if, the products which a seller is selling are expensive and unique, they cannot determine the margin of the selling price.
Customer Service • For a customer, a retailer is responsible for his business and not the dropshipper. He does not even know what sales strategy a retailer follows to complete the selling process and as he is only concerned about the product and quality. • Therefore, for a loss or damage or product enquiry, a customer will rely on a retailer for an immediate response which is difficult in this case. • Aftermath, a late or disappointing solution can ruin the business image.
Goods Returns • Standard Quality is what makes a customer walks hundreds of stores • If the consignment shipped is of inferior quality, customer will not accept and immediately return at company’s address. Aftermath, a late or disappointing solution can ruin the business image. • Knowingly or unknowingly, a retailer has to bear the loss of defective shipped goods though, he has not fulfilled it.
Stock Synchronization • Once the order is picked and packed to the destination, the stock level needs to be updated with both the parties- the retailer and the dropshipper. • The dropshipper has to notify in advance about the stock level to escape from out of stock issues otherwise, the last minute call of the stock issue can either double the expense of shipping or the retailer might lose a valuable customer.
Competition level is High • To stand alone in the busy crowd, a retailer has to think for unique opportunities rather than following the same line and downline the sales graph. • As competition is high, dropshippers have a tendency to charge more from the retailers and the retailers struggle with moderate rates though their selling price is high. • With the same business line, a fear of being swallowed by the competitors resist the temper of the retailer to go either for the unique opportunities or set exclusive policies for the customers.
Wrapping Up Though, dropshipping carries a set of disadvantages, it’s the best option for the online retailers who look for a better approach to expand their business or want to start from scratch. And, some of the drawbacks can be addressed easily if the process of dropshipping is streamlined using a suitable dropshipping management software.
About Orderhive Orderhive, the leading Inventory Management Software is packed with powerful features and dropshipping is one of them. Using this software, retailers can overcome a few dropshipping drawbacks like Order Tracking, Customer Service, Inventory synchronization,etc and make the process hassle-free. Orderhive Features: • Order Management • Shipping Management & Shipment Tracking • Dropshipping Management • Online purchase management And more... Take a look: http://www.orderhive.com/features.html
Content Credits The content is originally published on Orderhive WordPress Blog. The credit goes to this article post: https://orderhive.wordpress.com/2016/04/30/dropshipping-cons-every-retailer-should-be-aware-of/ Thank you.
